If you’re a resident or fellow who will be finishing up training this year OR you’re an established practitioner looking to make a possible change, we’ve got some tips for you as you start the process of shopping around for your medmal coverage. As the market continues to evolve, you need to be positioned to make the best choice so that you can get quick, affordable, yet comprehensive coverage for your job. And we’ve got some pointers for you.
The current malpractice insurance market is still relatively soft, but it is beginning to show signs of hardening. We talked about this a bit in a previous episode, but as a refresher, when the malpractice market is soft, there are lots of coverage options, premiums are lower, underwriters are more relaxed and open to writing business, and it’s much easier for doctors to find good, affordable coverage.
But when the market begins to harden, then the opposite occurs and there are fewer coverage options, premiums tend to go up, underwriters are more strict and less likely to write certain types of exposures, and it’s a but more difficult for doctors to find good, affordable coverage.
So, again, here at the beginning of 2023, we’re still looking at a relatively soft market – but it is showing signs of hardening.
Rates are starting to go up in several states and with a handful of specialties. In addition, some carriers are no longer writing certain classes of business. The big takeaway for you is that it will take a little more work than usual to secure good coverage.
So, how do you buy malpractice insurance in 2023?
Tip 1: Get yourself a good agent
While it is possible for you to do this alone, it can quickly become overwhelming. Buying medical malpractice insurance can be a time-consuming, frustrating process. There are many different companies to choose from, policy types to understand and coverage nuances that can make it difficult to really know if you’re getting the best coverage at the best price.
An agent can help you get quotes from multiple carriers, help you review and understand the various coverage options, and then work with you to apply for coverage and get your proof of insurance for credentialing. And… it doesn’t cost you ANYTHING to work with an agent, so please make sure you’re taking advantage of their services.
We do have some previous episodes on how to select a good agent, so we’ll link those for you here on the screen and in the show notes for you to review after this one is over.
Tip 2: Get quotes from MULTIPLE carriers
Because the market is still relatively soft, carriers WANT your business, and they will price it as aggressively as they can to try and win your account. So, you want to be sure that you’re getting quotes from at least 3 different carriers. This is where having an agent will come in handy, because they will do all the legwork for you.
When you’re comparing policy options between carriers, you’ll want to look at a number of criteria in order to pick the best one.
Here are some of the things you’ll want to know:
What is the premium (both now and in the future)?
What policy types to they offer?
What states do they write in?
How long have they been in business and what is their financial rating?
What’s their trial win rate, claim experience, and which defense firms do they use?
Do they offer consent to settle?
What kind of risk management and other value-added services do they offer?
All of these factors can make a big difference when you’re deciding which malpractice insurance carrier is best, so it’s worth the time to review each option thoughtfully and look at the QUALITY of the carrier (and their capabilities) in addition to their rates for coverage.
Tip 3: Get quotes for BOTH Occurrence and Claims-Made policies
There are 2 types of malpractice insurance in the market: Claims-Made and Occurrence. The easiest way for you to remember the difference between these 2 policy types is that the name describes how the coverage is triggered.
If you have an Occurrence policy, your malpractice coverage is triggered based on when the incident actually occurred.
If you have a Claims-Made policy, your malpractice coverage is triggered based on when the claim is made against you.
Occurrence policies do not need tail insurance. They are generally more expensive, but the rate is very stable (meaning it doesn’t go up year over year).
Claims-Made, on the other hand, DOES require tail insurance upon cancellation. So, you need to carry this coverage while you’re working and then secure a tail when you’re done. Claims-Made premiums start out low, but then they increase year over year until they reach the mature rate at year 5.
Since the pricing can vary so significantly between these two different types of coverage, it’s important for doctors to get rates for BOTH so that you can really compare the differences and choose the policy that’s right for you.
Tip 4: Get FUTURE rate projections for each quote
We recommend that you get an estimate of the next 5 years’ premiums so that you can look at long-term costs as you’re comparing your options. The reason why this is important is because you need to factor in the rate progression on the Claims-Made policy as well as the cost of future tail insurance. When you put the two policies side-by-side and forecast future costs, it’s easier for you to make a decision.
Here’s what that might look like…
Let’s say we have a Plastic Surgeon in South Carolina that is opening her practice for the first time. She wants to compare both Occurrence and Claims-Made options from multiple carriers.
When we lay out the quotes in a spreadsheet and price out Occurrence rates along with the Claims-Made rates for years 1-5, it’s easier to see how the options compare. Let’s start with Carrier A at the top of this list.
The cost of an Occurrence policy is $29,456. The cost of the Claims-Made policy is $8,225 for year 1, but then it jumps to $11,443 in year 2, $22,576 in year 3, $23,764 in year 4, and it matures at $26,405 in year 5. The approximate cost of tail insurance is $52,810.
Now let’s take it one step further, and do a 10-year budget to see what the long-term costs would be for both options.
When we price out both Occurrence and Claims-Made options for 10 years, including the price of tail, the total out of pocket for the Occurrence coverage is $294,560 and the total out of pocket for the Clai ms-Made coverage, including tail is $277,248. So, in this example, even with the hefty tail cost at the end, the Claims-Made policy is the most cost-effective option in the long-run.
Forecasting future rates and long-term costs is the best way for you to pick the right policy AND select the carrier that will be the best fit for you. And just a reminder… while price IS important, be sure to take a look at the other items that we discussed when comparing carriers to make sure you’re not only getting a good rate, but excellent coverage, as well.
Tip 5: Start the application process EARLY
It’s generally recommended that you contact an agent 4-5 months before you anticipate seeing your first patient. This gives you time to discuss your plans to determine which policy type is right for you, how much insurance you may need, and it allows the agent to give you some preliminary premium estimates to help you budget.
Once you’ve selected an agent and started the conversation about your malpractice needs, you’ll want to get quotes to review all of your options. Your malpractice insurance agent will ask you for some basic information to begin shopping around. It can take 1-2 weeks for your agent to obtain all of the quotes from the various carriers in the marketplace.
After the agent has collected all the quotes, they will present them to you and talk to you about the various options – explaining the premiums, the differences between carriers, and the choices that you can select from. This is a good time for you to decide if you’re interested in Occurrence or Claims-Made coverage and to determine what policy limits you’d like for your new insurance policy. Your agent can provide you with quotes and pricing scenarios for several different options.
Once you have selected the carrier that you’d like to proceed with, you will need to formally apply. Your agent will assist you in completing the application and sending it to the company’s underwriting team for review. It typically takes 3-5 business days for an underwriter to review your application, collect any additional information that they need, and then render a decision.
As a general rule of thumb, plan on at least 30-days to get your malpractice insurance setup. But, if you find yourself in a pinch and need coverage sooner than that, an experienced agent can speed the process up for you.